How rivals are eating DStv’s lunch
Icasa hearings add to online streaming woes for pay-TV giant
● When the Independent Communications Authority of South Africa begins its public hearings into pay-TV, central to which is the dominance of MultiChoice, it will have to consider if it is not more than a decade too late for an industry fast moving away from satellite broadcasting and onto the digital frontier.
It’s this shift that has the Naspers-owned pay-TV operator facing an existential crisis amid a barrage of fresh competition in the form of Netflix, Amazon Prime and YouTube. Competition that the pay-TV owner, launched 22 years ago, has never faced in a South African market where it has dominated the likes of e.tv and state broadcaster SABC.
MultiChoice’s CEO for South Africa, Calvo Mawela, argues that a pay-TV inquiry may have been warranted 15 years ago but not now, given how viewing habits are changing. “Competitive constraints are there already and there’s no need for any intervention,” he said.
He insists that the group is not abusing its dominance, and says DStv’s price increases have been kept in check by new rivals.
The days of linear broadcasting, and programmes being shown on a set schedule, are fast disappearing.
Owing partly to competition from US streaming services, MultiChoice’s DStv service was at last count losing an average of 630 Premium subscribers every day across its markets.
Icasa will hold public hearings on the lack of competition in the subscription-TV market next month, which could yield new regulations.
The regulator has already punted a few ideas about how it could open up the market, including that broadcasters share the rights to sports events, and that exclusive contracts for content should be shortened.
In 2010, UK regulators took similar measures to boost competition in the pay-TV market when they told Sky it would have to make its sports channels available to competitors.
That initiative “hasn’t really deterred subscribers” from Sky, said Simon Murray, a London-based analyst at Digital TV Research. Sky has kept its subscriber numbers in the UK relatively flat in recent years, at about 8.8 million.
Murray said many companies had tried and failed to enter South Africa’s pay-TV sector, which MultiChoice dominates thanks to its sports broadcasting rights and deals with Hollywood studios.
Considering that most consumers still access pay-TV services via satellite, and to promote choice and affordability, Icasa needs to consider if it should “impose pro-competitive conditions on such licensees”, said the regulator’s spokesman, Paseka Maleka.
But Mawela is frank about the inevitable demise of traditional pay-TV, which, like print media, faces a steady decline as online alternatives flourish.
“The shift is already happening, and the regulation that Icasa is proposing will just make the business die quicker and the online [players] would be the ones that benefit.”
More stringent regulations for MultiChoice would be a boon for Netflix and its foreign peers, which do not have to abide by the same rules when they operate in South Africa, Mawela said.
For Icasa’s inquiry to be “credible”, the authority needed to broaden its scope to include online platforms.
“If you look at the whole sector, you may come to the conclusion that actually the best thing to do now is to deregulate, or perhaps you need like-for-like regulation.”
In other words, online competitors should also have to comply with local content rules, licensing fee requirements, the codes of the Broadcasting Complaints Commission of South Africa, and the end-user and subscriber service charter, he said.
MultiChoice would refer Icasa to pending rules in the EU that will require companies like Netflix to invest heavily in local content and to comply with hate-speech rules and other laws.
MultiChoice has even asked the National Treasury if it plans to tax video-streaming platforms, since its own streaming service, Showmax, has to pay taxes while its foreign competitors do not.
Icasa’s Maleka said the regulator was cognisant of the potential impact of online players, having adopted a “wait-and-see approach not to stifle innovation”. The authority would conduct a separate inquiry into their market impact “in the near future”.
Meanwhile, Mawela said MultiChoice was responding to the changing marketplace by “moving full-steam ahead to online”. But it has far shallower pockets than Netflix, which plans to spend nearly R100-billion globally on producing new content in 2018.
While Netflix has said it does not plan to start showing live sports, some of its peers were moving into that space, meaning that bids for sports rights were becoming more competitive, said Brandon Foot, general counsel for MultiChoice’s video entertainment business.
Local subscription-TV providers StarSat and Kwesé are competing for sports broadcasting rights, as are mobile operators including Vodacom, which recently bid for rights to show Premier Soccer League matches.
And Foot said some sporting federations, such as Formula One, were selling content directly to consumers.
He said MultiChoice opposed Icasa’s preliminary view that sports broadcasting rights should be split. “Exclusivity is the lifeblood of pay-TV, it’s a differentiator and it’s been accepted by regulators across the world . . . It’s not a swearword, it’s a principle: why would you pay a subscription if you can get that content for free?”
Rights-sharing was already happening to some extent, said Mawela. The PSL employs “a good example” of a model that works, in that a pay-TV broadcaster that buys comprehensive rights to air matches has to sub-license those rights to a free-to-air operator.
“I think the biggest fear we have is that with the budgets that the online players have, it’s just a question of when they are going to bid, and we’ll never outbid them,” Mawela said.
To facilitate its shift away from satellite broadcasting to online, Mawela said MultiChoice planned to deepen its partnerships with mobile operators, which have the infrastructure to deliver content to consumers.
He said the group’s statistical models indicated that the South African market was not suited to the US model of pay-per-view sports broadcasting, where users pay to watch a single football match, for example. Murray disputes MultiChoice’s claims that Netflix poses a serious threat to its subscriber base, as the streaming service offers no live content or sports.
“I think that the biggest threat to pay-TV is probably piracy rather than online platforms,” he said.
Showmax was “a good rival to Netflix”, with plenty of local content, although it could not compete on original content.
However, he said partly due to relatively low broadband penetration rates and high internet costs, it would take MultiChoice about 10 years to shift all customers online, although the operator is likely to keep other forms of delivery.
Kwesé, which offers pay-TV, free-to-air and digital services, will participate in the public hearings in May. The company said it “supports any regulatory intervention that promotes competition in the interest of consumers. For South Africa’s pay-TV industry to grow, sports and entertainment content should be easily accessible through multiple providers.”
Constraints are there . . . There’s no need for any intervention Calvo Mawela MultiChoice CEO for South Africa
Exclusivity is the lifeblood of pay-TV, it’s not a swearword, it’s a principle